Threat of more US sanctions prompts Russia to take OFZ treasury bond roadshow to China

Concerns over the possibility of the US administration introducing another round of sanctions has prompted Russia to prepare for a Chinese roadshow where it will pitch its yuan-denominated OFZ treasury bonds, its deputy finance minister Sergei Storchak said last week.The government in Moscow has already raised $23.65bn through bonds this year, largely from Western investors attracted by the promise of good returns thanks to the central bank’s key interest rate being pegged at 8.25%, but this also makes Russia vulnerable to losing those investors; as of September 1 foreign investors, many of them American, held some $34bn, or almost 32% of the total OFZ bonds outstanding, according to central bank data. In August, U.S. President Donald Trump signed into law a new package of sanctions, one of whose provisions was to task the U.S. Treasury Secretary with submitting a report on the impact of expanding the sanctions that it imposed over Moscow’s role in the Ukraine crisis to cover Russian sovereign debt. That report is still pending. Currently, Russian sovereign debt-raising is not directly prohibited by U.S. or European sanctions, but Moscow is not in the mood to take any chances and the roadshow, which is expected to take place “soon”, would be the first practical signs of Russia preparing itself for the potential impact of a US expansion of the sanctions. “We are laying the groundwork to have an alternative just in case our traditional investors take fright. They might be frightened by the new sanctions regime … We need to be prepared for that.” Although he did not specify how much will be put on offer, Russia has previously indicated that it plans to raise the equivalent of $1bn in yuan-denominated bonds.